Royal Bank of Scotland and former directors including ex-chief executive Fred Goodwin are being sued for up to £4bn by thousands of private shareholders in a class action law suit.
The RBoS Shareholders Action Group also includes about 100 institutional investors, said to include HSBC, Deutsche Bank, Credit Agricole and Collins Stewart, plus a number of local authority pension funds and a group of churches and charities, all of whom lost money in the bank's 2008 rights issue.
The action group claimed that the former directors "sought to mislead shareholders by misrepresenting the underlying strength of the bank and omitting critical information" from the rights issue prospectus. The group – representing more than 12,000 private shareholders, many of whom are pensioners – has launched proceedings against Goodwin, ex-chairman Tom McKillop, the former head of investment banking Johnny Cameron, ex-finance director Guy Whittaker, and the bank itself.
This is the second claim to be lodged against RBS in the last few days. It emerged last week that the bank is being sued for misleading investors, in a joint claim brought by Dutch bank ING and several pension schemes.
The action group argued that the alleged failings mean that under the terms of the Financial Services and Markets Act, RBS is liable for losses sustained by investors who participated in the rights issue. It added: "It is estimated the final claim may be as much as £4bn."
In April 2008, RBS asked shareholders to pump in £12bn of new capital to shore up its balance sheet after its disastrous acquisition of Dutch bank ABN Amro. Just months later the bank was part-nationalised in a £45bn government bailout that left the taxpayer with an 82% stake in the institution.
The action group, which is represented by law firm Bird & Bird, claims that "vital facts were withheld from the shareholders ahead of the rights issue. At the same time, despite evidence to the contrary, the directors made recklessly optimistic statements which gave a grossly misleading impression of the underlying strength of the bank".
A spokesman for the action group said: "Today represents a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors in the financial crisis. Now, for the first time, some of these directors will have to answer for their actions in a British court."
The group said its claim was lodged in London's high court today . The group claimed that, "in essence, the directors created a false market for RBS shares to raise the £12bn required to shore up the balance sheet".
The group has previously said that any private or institutional shareholder who signed up for shares in the rights issue was eligible to join its ranks, and that Philip Marshall QC of Serle Court chambers was acting as its leading counsel.
Simon Hart, banking litigation partner at City law firm RPC, said: "This is one of the largest shareholder actions we have seen brought against the UK banks. These type of actions are by their nature relatively rare but have been borne directly out of the unprecedented upheavals in the banking industry in 2008." Law firm Herbert Smith Freehills, which is acting for RBS, declined to comment.
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